Vtech 2001 Annual Report Download - page 38

A. BASIS OF PREPARATION
The consolidated financial statements are prepared in accordance with International Accounting Standards
(IAS) and under the historical cost convention, with certain tangible fixed assets included at revalued amounts.
The Company is incorporated in Bermuda and the Group presents its financial statements in United States
dollars.
The Group's separable segments are set out in note 1 to the financial statements.
B. BASIS OF CONSOLIDATION
Consolidation
The consolidated financial statements include the financial statements of the Company and its subsidiaries
together with the Group's share of the results and retained post acquisition reserves of its associates under the
equity method of accounting, drawn up for the year ended 31st March. The results of subsidiaries and
associates are included from the effective dates of acquisition up to the effective dates of disposal.
Subsidiaries
Subsidiaries are those companies in which the Group, directly or indirectly, has an interest held for the long
term, of more than 50% of the voting rights and is able to exercise control over the operations. Separate
disclosure is made of minority interests.
Associates
Associates are those companies, not being subsidiaries, in which the Group has an attributable interest of 20%
or more of the ordinary share capital held for the long term and over which the Group exercises significant
influence, but which it does not control. The Group's investments in associates are included in the consolidated
balance sheet at the Group's share of attributable net assets. Income from associated companies is included
in the consolidated income statement at the Group's share of profits less losses of associates.
C. GOODWILL
Goodwill represents the excess of the cost of an acquisition over the fair value of the Group's share of the net
assets of the acquired subsidiary or associate at the date of acquisition. Goodwill on acquisitions is reported in
the balance sheet as an intangible asset and amortized using the straight line method over its estimated useful
life not exceeding five years. Goodwill on acquisitions which occurred prior to 1st April 1996 was charged
direct to reserves in the year of acquisition.
The profit or loss on disposal of a subsidiary or an associate is calculated by reference to the net assets at the
date of disposal including the attributable amount of goodwill which remains unamortized but does not include
any attributable goodwill previously eliminated against reserves.
The carrying amount of goodwill is reviewed annually and written down for permanent impairment where it is
considered necessary.
D. NEGATIVE GOODWILL
Negative goodwill represents the excess, as at the date of acquisition, of the Group's interest in the fair values
of the identifiable assets and liabilities acquired over the cost of the acquisition.
To the extent that negative goodwill relates to expectations of future losses and expenses that are identified in
the plan for an acquisition and can be measured reliably, but which do not represent identifiable liabilities at
the date of acquisition, that portion of negative goodwill will be recognized as income in the income statement
when the future losses and expenses are recognized.
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Principal Accounting Policies